Forest Labs to pay $313 million in DOJ settlement

Forest Laboratories is the latest pharmaceutical company to settle unlawful marketing allegations with a multi-million dollar payout – over $313 million – to the Department of Justice (DOJ), just two weeks after Allergan agreed to pony up $600 million to settle illegal Botox marketing practices.

Forest Pharmaceuticals, a subsidiary of Forest Laboratories, agreed on Wednesday to plead guilty to a felony obstruction of justice charge, and two misdemeanor counts related to the distribution of an unapproved drug – Levothroid – and the misbranding or off-label promotion of two anti-depressants, Lexapro and Celexa, which also included paying kickbacks to doctors, according to a DOJ release.

Levothroid, a levothyroxine sodium drug used to treat hypothroidism, was marketed without FDA approval until the company received a Warning Letter from FDA in 2003, after which Forest allegedly rushed distribution of the drug, in quantities disallowed by FDA's previously announced phase-down of levothyroxine sodium products that had not received approval. All levothyroxine sodium products were sold legally without approval until 1997, when FDA decided that the products would need an approval to be prescribed. Forest ceased manufacturing the drug in 2003, but has commercialized a levothyroxine sodium tablet since then, under the same brand name, through a supplier partnership with Lloyd Pharmaceuticals. Forest also allegedly submitted inaccurate information to FDA as part of a New Drug Application for Levothroid, and obstructed a regulatory inspection concerning the data, according to the DOJ release.

Marcella Auerbach, managing partner at Nolan & Auerbach, a law firm specializing in qui tam healthcare fraud cases, said the Levothroid portion of the settlement was “unlike other [whistleblower] cases involving off-label marketing of drugs,” but instead dealt with “illegally marketing a drug that has never been approved.” The firm represented one of the three whistleblowers in the Forest case – who will be rewarded with a $14 million cut from the DOJ's take – and also represented a whistleblower in the recent Allergan settlement. Aeurbach said her firm is involved in several other ongoing qui tam cases related to unapproved drugs, including litigation surrounding dietary supplements manufactured by Abbott Laboratories.

In addition to the alleged misconduct with respect to Forest's Levothroid, the company also promoted Lexapro and Celexa – two anti-depressant drugs – off-label, specifically for use in pediatric patients. Lexapro received an FDA indication for pediatric use in adolescence 12 years and older in 2009, but the DOJ allegations occurred prior to that approval, and include kickbacks in the form of “cash payments disguised as grants or consulting fees, [and] expensive meals and lavish entertainment,” according to the DOJ. Celexa is currently approved for adult use only. Forest was also required to enter into a Corporate Integrity Agreement with the DOJ, as part of the settlement.

“The Justice Department will continue to ensure that taxpayers do not foot the bill when such unlawful and improper conduct occurs,” Assistant Attorney General for the Civil Division of the DOJ said in a statement on the settlement.

On Forest's website, chairman and CEO Howard Soloman said in a statement that the company is “pleased to bring closure to this long-running investigation. We remain dedicated to ensuring that we operate in full compliance with all laws and regulations, and…uphold the highest principles of integrity, honesty, and ethics.”

According to DOJ estimates, the False Claims Act – which deals with defrauding Medicare or Medicaid, and also contains the qui tam whistleblower provision – has been used to recover $3.391 billion since January 2009, in cases involving fraud against federal health care programs.

In May 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT), in order to turn up the heat on perpetrators of health care fraud. The DOJ called the Forest settlement “another step for the HEAT initiative,” and President Barack Obama's fiscal year 2011 budget request includes an additional $60.2 million to allow the HEAT initiative's “Strike Forces” to expand into additional cities, according to a DOJ blog post dated August 27. Medicare fraud Strike Forces have already expanded from launch sites in South Florida and Los Angeles, to Houston, Detroit, Brooklyn, Baton Rouge and Tampa, according to the post.